Many of the questions the Fed has about how Trump's trade war is impacting the inflation outlook will get timely answers this week. Well, updates at least, since only President Donald Trump knows how long Trump's Tariff Turmoil (TTT) will continue disrupting the world's biggest economy.
On Friday, we learned that half of Fed's dual mandate is doing just fine. The full-employment part of the mandate is confounding the hard-landers, as evidenced by the 139,000 increase in payroll employment and 4.2% jobless rate in May. So, there's no urgent need for the Fed to hit the monetary accelerator—certainly not at next week's June 17-18 Federal Open Market Committee meeting.
The resilience of the economy should be confirmed anew by this week's economic data releases. And the extent to which Fed officials might have an inflation problem (at least in the short run) could come into clearer view. Highlights include:
(1) Inflation: expectations. The New York Fed's closely watched survey of consumer expectations (Mon) will get the week started. The May survey showed inflation expectations over the year ahead edged up to 3.6%, while three- and five-years-ahead expectations both remained near 3.0% (chart). Fed officials would probably like to see all three below 3.0%.
